Albemarle's major cost-cutting in deepening lithium industry recession

Company News

by Glenn Dyer

On Wednesday, the world's largest player in the lithium industry, Albemarle of the US, unveiled extensive restructuring and cost-cutting measures aimed at saving millions of dollars in expenses and capital expenditures (capex). This development sheds light on Albemarle's decision to divest its nearly 4% stake in Liontown following the thwarted takeover attempt at $3 a share by Gina Rinehart's Hancock Prospecting.

The shares were offered on Wednesday evening in a range of $1.26 to $1.32 each, notably below Liontown's Wednesday closing price of $1.36 a share. Shortly after this sale, the company released a statement outlining the comprehensive cost-cutting strategy.

Albemarle plans to reduce its workforce and postpone spending on a US refinery project as part of its broad initiative to reduce costs, prompted by an over 80% decline in lithium prices over the past year. The company intends to slash up to half a billion dollars from its 2024 investment plans while maintaining spending between $1.6 billion to $1.8 billion, down from $2.1 billion in 2023. Notably, the cost cuts do not affect the three hydroxide trains under construction at Kemerton, near Albemarle's Greenbushes lithium mine in southwest WA.

In its statement, Albemarle listed the projects that would proceed and those facing cuts, including completing commissioning activities for Trains 1 and 2 at the Kemerton lithium conversion facility, prioritizing permitting activities at the Kings Mountain spodumene resource, deferring spending at the Richburg mega-flex lithium conversion facility in the US, and limiting capital spending to essential health, safety, environmental, and maintenance projects.

The company did not specify the exact number of employees to be affected by these cuts, aiming for savings of $50 million in 2024 and a similar amount in 2025. Albemarle anticipates incurring charges in the current quarter, primarily related to severance and benefits, exit and disposal activities, and asset write-downs.

Albemarle's CEO, Kent Masters, expressed confidence in the company's long-term prospects, stating, "The actions we are taking allow us to advance near-term growth and preserve future opportunities as we navigate the dynamics of our key end-markets. The long-term fundamentals for our business are strong, and we remain committed to operating in a safe and sustainable manner."

In November, Albemarle had already lowered its full-year profit and sales guidance due to the downward trend in lithium prices. Lithium carbonate prices further declined by 1% on Wednesday on the Shanghai Metals Market, closing at 103,800 yuan per tonne, approximately $4,556 per tonne—a nearly 11% drop over the past month alone.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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